Jul 28, 2011

Tax Advantages of ISA

Individual savings account or ISA is a savings scheme regulated by the government. UK government has introduced this savings scheme in order to encourage the population to save money rather than spending money as means of financial control. ISA helps people to have a control over their purchasing power and save as much money as they can.



If people are encouraged to save, it becomes easier to keep inflation at a manageable and sustainable level. It helps the economy to perform well. ISA plays a major role in maintaining economic stability of a country. Individual savings account is not only profitable for the state but it is also beneficial for the individuals who invest in ISA.

It is mainly the tax benefits that encourage an individual to invest in ISA. Individual savings account is ideal for those who wish to make some extra money through savings.

In order to have a good control over the nation’s economy it is crucial to motivate the population to hold onto their money as long as they can. If people prefer excessive spending over saving, it can put pressure on the economy by pushing up inflation. Those who have extra cash can utilize ISA for escaping the extra burden of tax. If they put aside their money and invest in individual savings account, they won’t have to pay the extra tax for having cash.

The amount people save in ISA is not taxable. Moreover the interest they accrue with the individual savings account is free as well. No tax is charged either for the capital or for the interest. Besides, the capital gain that one withdraws from an ISA is also tax free. This means that investing in stocks and shares ISA is one of the best ways to make money.

In other savings amount, when people pay money it is not deducted from their taxable income. It means that they need to pay tax on the amount they wish to save in the savings account. But in case of ISA they don’t need to pay tax. It is then obvious for people to prefer ISA over other savings accounts.

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